Unlawful practices hit top cryptocurrency exchanges, including Binance

The most recent market surveillance report from the Blockchain Transparency Institute claims that Binance, the world's biggest cryptocurrency exchange by trading volume, shows signs of wash trading.

The Institute spent the last four months working on a new algorithm that is designed to identify individual accounts on cryptocurrency exchanges that are involved in wash trading, a process where traders buy and sell securities for the express purpose of feeding misleading information to the market.

After several months of research, BTI discovered over 10 percent of trading on Binance is wash trading.

Most of the wash trading was observed on 30 trading pairs on the exchange, with some pairs showing signs of up to 75 percent wash trading volume.

"About 88 to 92 percent of daily trading volume is fabricated depending on the day. Bitcoin's daily trading volume is about 92 percent fabricated. [Among] the top 40 largest exchanges with actual volume, Bitcoin's volume is about 65 percent fabricated. Almost all of this fabricated volume comes from OKEx, Bibox, HitBTC, and Huobi."

A variety of strategies have been used to deceive investors, including buying followers and likes on social media platforms, fake order books, mirror wash trading with other exchanges, and the implementation of bots that prevent the price of those cryptocurrencies from being affected while the process takes place.

"The issue of fake trading volumes is a real one in the industry and people have a right to know that the numbers provided by exchanges are legitimate. We think there should be no exceptions and we see something like DATA as a natural next step as our industry grows in both maturity and mainstream acceptance."

Alon Karniel, COO of Algoz, explained in a recent interview that cryptocurrency exchanges benefit the most from this type of deceitful activity since it makes them more appealing to upcoming startups which are willing to pay hefty listing fees.

BTI revealed that the listing costs from just the wash trading exchanges totaled over 150 BTC. Deceptive practices in the cryptocurrency market are likely to continue as many of the players involved profit from them.

Even though they raise questions about the industry as a whole, Travis Kling, CIO of Ikigai Asset Management, believes that some exchanges may rely on these type of practices to keep their businesses afloat.